Studies have suggested that continuous Wnt/beta-catenin signaling in nascent cartilaginous skeletal elements blocks chondrocyte hypertrophy and endochondral ossification, whereas signaling starting at later stages stimulates hypertrophy and ossification, indicating that Wnt/beta-catenin roles are developmentally regulated. To test this conclusion further, we created transgenic mice expressing a fusion mutant protein of beta-catenin and LEF (CA-LEF) in nascent chondrocytes. Transgenic mice had severe skeletal defects, particularly in limbs. Growth plates were totally disorganized, lacked maturing chondrocytes expressing Indian hedgehog and collagen X, and failed to undergo endochondral ossification. Interestingly, the transgenic cartilaginous elements were ill defined, intermingled with surrounding connective and vascular tissues, and even displayed abnormal joints. However, when activated beta-catenin mutant (delta-beta-catenin) was expressed in chondrocytes already engaged in maturation such as those present in chick limbs, chondrocyte maturation and bone formation were greatly enhanced. Differential responses to Wnt/beta-catenin signaling were confirmed in cultured chondrocytes. Activation in immature cells blocked maturation and actually de-stabilized their phenotype, as revealed by reduced expression of chondrocyte markers, abnormal cytoarchitecture, and loss of proteoglycan matrix. Activation in mature cells instead stimulated hypertrophy, matrix mineralization, and expression of terminal markers such as metalloprotease (MMP)-13 and vascular endothelial growth factor. Because proteoglycans are crucial for cartilage function, we tested possible mechanisms for matrix loss. Delta-beta-catenin expression markedly increased expression of MMP-2, MMP-3, MMP-7, MMP-9, MT3-MMP, and ADAMTS5. In conclusion, Wnt/beta-catenin signaling regulates chondrocyte phenotype, maturation, and function in a developmentally regulated manner, and regulated action by this pathway is critical for growth plate organization, cartilage boundary definition, and endochondral ossification.